Astra Microwave - Lumpiness in Order execution; Order book continues to be robust: CRISIL

CRISIL's research report on Astra Microwave

 
Astra Microwave Products Ltd’s (Astra’s) Q1FY18 standalone results were below CRISIL Research’s expectations. Revenue increased just 3.6% y-o-y to  Rs. 468 mn in Q1FY18 owing to weak execution. Gross margin improved to 65% in Q1FY18 from 50% in Q1FY17 owing to an increase in the share of high-margin domestic sales to ~99% of total revenue. Other expenses dropped 39% y-o-y owing to the reclassification of late delivery charges, which are now being adjusted from revenue. Consequently, EBITDA increased to  Rs. 86 mn vis-à-vis EBITDA loss of  Rs. 15 mn in Q1FY17. Expansion in EBITDA led to PAT of  Rs. 42 mn versus loss of  Rs. 67 mn in Q1FY17. The order book tallied at  Rs. 5.8 bn at the end of Q1FY18–providing revenue visibility for 12-18 months. We remain positive on Astra’s long-term prospects, considering strong growth potential of defence spending and the company’s R&D initiatives. We maintain the fundamental grade of 4/5.

We lower our earnings estimates for FY18-19E owing to lower-than-expected order execution by the company. We continue to value Astra using a P/E multiple of 14x on FY19E EPS and value its FY17 investments at book value. Consequently, the fair value is revised to  Rs. 143 per share. At the current market price of  Rs. 124, the valuation grade is 4/5.

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